CMBS Issuance to Rise in 2024: KBRA

KBRA released its 2024 CMBS Sector Outlook report, highlighting 2023 credit trends and forecasts for U.S. CMBS issuance for 2024. The report focuses on the current lending environment, as well as factors that may affect performance.

KBRA forecasts that issuance will rebound from 2023 lows with a 23.6% year-over-year gain in 2024, as the quarter-over-quarter positive trend seen for much of this year will continue, with increased growth expected in the second half of 2024.

“This assumes a somewhat steady interest rate environment, along with our expectation for a generally rocky capital and CRE market in the near term that will begin to exhibit signs of stabilization as 2024 progresses,” according to the report.

This will be due to an increasing number of borrowers acknowledging higher interest rates and lower valuations, as well as no new major CRE or macroeconomic surprises.

Furthermore, given performance pressure on existing loans, KBRA noted it could expect additional loan pool sales and returned distressed debt securitizations, which could add to issuance volume not reflected in its 2024 prediction.

While demand for industrial and multifamily properties remains strong, there are hints of price easing, according to the report. Office continues to struggle as a result of low demand, underutilized space, and functional obsolescence. Lodging and retail, meanwhile, are performing well, with both acquiring more exposure in CMBS transactions.